Vodafone Japan associate merges units

August 24, 2001 Posted: 1028 GMT

By Eriko Amaha

TOKYO, (Reuters) - Japan Telecom Co Ltd, Japan's third-largest telecoms firm, said on Friday it would merge its J-Phone group wireless units on November 1, a streamlining move sought by its largest shareholder, Vodafone Plc.

"We decided on this merger to make a major leap forward, with the aim of quickly rising to number two in the industry and taking on (Japan's dominant wireless carrier) NTT DoCoMo," Japan Telecom said in a statement.

Under the deal, J-Phone East Co Ltd, J-Phone West Co Ltd and J-Phone Tokai Co Ltd will become part of holding company J-Phone Communications Co Ltd.

Japan Telecom will hold a 45.05 percent share of the merged entity and British-based Vodafone will hold 39.67 percent.

Vodafone currently holds a 45 percent stake in Japan Telecom and a direct 46 percent stake in holding company J-Phone, as well as stakes ranging from around 14 to 16 percent in each of the three regional J-Phone firms.

Vodafone said in a separate statement that its total interest in J-Phone would remain at approximately 60 percent.

Vodafone will ultimately be appointing six out of a total 13 members of the executive board, it said.

The move came as little surprise to the market, although news that a merger announcement was imminent helped Japan Telecom's shares climb into positive territory after falling more than five percent earlier in the session to their lowest in five months.

Japan Telecom's shares ended the Friday session up 0.56 percent at 358,000 yen, in line with a modest 0.35 percent gain in the benchmark Nikkei share average.

They have shed nearly 40 percent of the value over the past five weeks, however, in line with broad weakness in global telecoms shares.

"With the new ownership percentages, it appears there hasn't been any significant change in control over J-Phone," said BNP Paribas analyst Katsuo Hori.

"I think Vodafone wanted to do this in a straightforward way to get the company consolidated. After this, they should begin to streamline operations and consider other steps." Vodafone Chief Executive Chris Gent, who was in Tokyo in July, said then that Vodafone's first priority was to bring the regional J-Phone group companies together in order to streamline management and prepare for a possible share listing.

Japan Telecom President Haruo Murakami told a news conference this month, however, that no decision on listing had been made.

Since last year, Vodafone has been boosting its stakes in Japan Telecom and its wireless units, aiming to solidify its foothold in the world's second-largest telecoms market and to get hands-on experience in third-generation (3G) mobile services, which promise super-fast data and voice transmission.

J-Phone plans to launch 3G services next June.

"The innovation and the advancement J-Phone has demonstrated in its mobile technology, in its Java technology, in its J-Sky (wireless Internet) services, it's these sorts of things that Vodafone is very interested in having them export to other parts of the world," William Morrow, Vodafone vice president and country manager for Japan, told a news conference on Friday.

J-Phone Communications President Koichi Sakata added that the wireless group is aiming for a 20 to 30 percent cut in costs as a result of the merger.

The new company will be capitalised at 26.8 billion yen and Daryl Green, who currently works for Global Crossing Japan but will become a Vodafone employee on November 1, will serve as its chief operating officer.

J-Phone has been closing the gap in recent months with KDDI

Corp, Japan's second-largest wireless carrier. The latest industry data indicated that J-Phone had 10.74 million subscribers as of the end of July, compared with KDDI's 11.61 million.

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